All’s Not Well with Wells Fargo

Analysts are retreating from their bullish calls for Wells Fargo (NYSE: WFC) shares because they believe the Federal Reserve's surprising enforcement action will hurt the bank's financial results and hang over the stock for most of 2018.

The U.S. Federal Reserve said Friday it is restricting Wells Fargo's size in response to "widespread consumer abuses." Washington is prohibiting the bank from growing any larger than its total assets as of the end of 2017 until "sufficient improvements" are made.

At least five Wall Street investment banks downgraded the shares following the news.

RBC Capital Markets reduced its rating for Wells Fargo shares to underperform from outperform, predicting the restrictions will detract from investor sentiment.

Other Wall Street firms focused on the financial impact from the Fed's asset growth limitations for the bank.